3/18/2009 @ 6:50PM

Is Oracle's Buying Binge Over?

Oracle
on Wednesday pleased investors with a five-cent quarterly dividend, its first ever. The move is an impressive one, as many companies are cutting dividends to preserve cash in the downturn. Yet it’s also a stodgy one.

Probably not. Even with the new dividend, Oracle will have money to spend.

The company’s operating margin in the most recent quarter was 36%, the highest ever for that time period. Free cash flow, a measure of cash flow from operations minus capital expenditures, was up 14% to $8 billion, and Oracle sits on $8.2 billion in cash and cash equivalents. The annual cost of the new dividend is just over $1 billion.

Oracle has acquired 30-plus companies in recent years, including big ones like Siebel Systems,
BEA Systems
and PeopleSoft. The company now has an enormous customer base that’s unlikely to impetuously rip out systems. Those firms continue to pay lucrative maintenance fees to stay up with the latest product changes. That side of the business grew 11%, and Oracle rung up the cash.

Oracle could buy up lots of Web software firms on the cheap now. One to consider: talent management outfit
SuccessFactors
, which is trading at $6.57 a share, nearly half of where it debuted in November 2007. Or, recruiting software firm
Taleo
, which is off 56% from its 2008 peak, partly because of accounting problems.

Though Ellison has put his own money in Web software firm
Netsuite
, he’s been less eager to move Oracle in that direction. That could change as competition from Web software giant
Salesforce
broadens into software areas beyond sales force automation. Salesforce in August acquired call-center technology firm InStranet.